Plaintiffs originally brought these actions separately, Hanahan and Shoehigh filing in Illinois, and Miller filing in Michigan. Under § 501(b), union members are authorized to bring a derivative suit only "upon leave of the court obtained upon verified application and for good cause shown." This showing may be made in an ex parte proceeding. In both the Hanahan and Miller actions, the courts found good cause and permitted the plaintiffs to proceed with the suits. Pursuant to defendants' motion, however, both courts transferred the actions to the United States District Court for the District of Columbia, since all the defendants except one reside in or around Washington, D.C., and any witnesses will most likely be from this area. Because these cases concern identical issues and defendants, and as they are both before me, they will be consolidated for all purposes.

On May 10, 1991, this Court heard oral argument on two motions. Defendants have moved to dismiss, asking this Court to reconsider the prior ex parte orders granting plaintiffs leave to bring these actions. In addition, plaintiffs have moved for a preliminary injunction prohibiting the UBC from reimbursing any of defendants' attorneys' fees at this time. Each motion is discussed in turn, below.

Plaintiffs' complaints are fundamentally flawed in one respect, however. All plaintiffs failed to present a request to the UBC to sue McGowan and Krieger, the union attorneys. Section 501(b) specifically requires that union members present a demand to sue and be refused before leave to bring a derivative suit may be granted. Because plaintiffs failed to comply with a condition precedent to suit, there is a technical defect in the complaints as to these two defendants which prohibits their being named in the suits at this time. Id., at 192. McGowan and Krieger will be dismissed as defendants, but plaintiffs will have thirty days in which to present the demand to sue to the UBC and then, in the event that UBC refuses to bring its own action against said defendants, decide whether it is appropriate to move this Court to add McGowan and Krieger as additional defendants.

Preliminary Injunction :

Plaintiffs in the Hanahan case obtained a temporary restraining order prohibiting the UBC from paying attorneys' fees for defendants Lucassen, Wrigley, McGowan and Krieger until after the case was transferred, and in the Miller action, defendants voluntarily agreed to defer any attorneys' payments.
*fn2"
It is for this Court to decide, now, whether the defendants' attorneys' fees may be reimbursed from UBC funds. The issue before this Court is limited to those fees related to the motion to transfer which was successfully argued and won by defendants.
*fn3"
Defense counsel agrees that he has no present intent to seek reimbursement for any additional fees until completion of this litigation. Plaintiffs argue that the UBC should be precluded from paying any counsel fees during the pendency of this action because defendants have been accused of wrongdoing as UBC representatives. Only upon defendants' exoneration, plaintiffs argue, can the union pay attorneys' fees.

The general rule is that union funds should not be used to pay attorneys' fees for the defense of officers charged with violations of their fiduciary duties. The court in Milone v. English, 113 U.S. App. D.C. 207, 306 F.2d 814, 817 (D.C. Cir. 1962) propounded the basic precept:

As a general proposition, . . . funds of a union are not available to defend officers charged with wrongdoing which, if the charges were true, would be seriously detrimental to the union and its membership.

Similarly, in Morrissey v. Segal, 526 F.2d 121, 129 (2d Cir. 1975), the court explained that questions of union indemnification of defense costs must be resolved on an issue by issue basis, in which various costs will be reimbursed or enjoined by "sorting out those interests of the [union] and the defendants which are compatible and those which are not." The Morrissey court even ruled that reimbursement of defense costs was not automatically foreclosed where the plaintiff succeeds on the merits. Instead, the court must examine the evidence to determine whether the defendant should be reimbursed for defending those actions which were blameless, or which were not intended to conflict with the union's interests. Id., at 128.

It is for this Court to examine, therefore, whether the fees expended on the motions to transfer were in the UBC's interests such that reimbursement of these fees would not present a conflict of interest between the union and the defendant officers. The UBC has voted to pay for the defense of the defendants out of union funds. While persuasive, this by itself is not enough. Courts have frequently enjoined payment until the end of a case, notwithstanding authorization by a majority vote of union members. See, e.g., Highway Truck Drivers and Helpers, Local 107 v. Cohen, 182 F. Supp. 608 (E.D. Pa. 1960), aff'd, 284 F.2d 162 (3d Cir. 1960), cert. denied 365 U.S. 833, 5 L. Ed. 2d 744, 81 S. Ct. 747 (1961).

In Highway Truck Drivers, the court enjoined payment of counsel fees because it determined that the union had no real interest in the defense that would justify spending large sums of money for defense counsel. While the court took the union's vote into account, and explained that the union's wishes should be given wide latitude, it decided that the facts of the case could not support a legitimate union interest in the payment of defense counsel. Id. at 620. The court further noted that situations could arise in which the case against the officers could have a direct and injurious effect upon the union itself. In these cases, the union would be justified in paying defendants' counsel fees in order to defend its interests. Id.

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